Probate process costs

[gerard2006]

Jurisdiction

New York

Folks - I'm using an employer-sponsored service to either create a last will or a trust and had some high level questions. Our situation is fairly straight forward with young kids, some passive real estate investments and retirement accounts. Btw we retire, we do expect 3-4m in assets incuding our primary home

1) Is it worthwhile undergoing the complexity of an irrevocable trust to simply quality for Long-term medicaid help (either center or home based)
2) If no.1 is a Negative, then is a revocable living trust worth it to avoid cost of probate (I've heard 3-4% of estate size in the NY area being the norm). The service I use includes trusts in their package so I get to choose if I simply want a last will or 'trust + pour-over will'

Thanks

 

[zddoodah]

Is it worthwhile undergoing the complexity of an irrevocable trust to simply quality for Long-term medicaid help (either center or home based)

I don't really understand the question. How old are you, and why would you want the sort of care that Medicaid provides if you expect to have several million in assets? I'm also curious what you mean by "the complexity of an irrevocable trust."

is a revocable living trust worth it to avoid cost of probate

I'm not sure I understand what "worth it" means. The cost of a basic, revocable trust shouldn't be more than $2k. If you own your home and have real estate investments, not having an estate plan that includes a trust would likely be very foolish.

I don't know anything about the "service" you're using, but an estate plan is the sort of thing that's worth actually sitting down with a local attorney.

 

[Zigner]

...an estate plan is the sort of thing that's worth actually sitting down with a local attorney.

Seconded - particularly in light of the kids and the expected assets now and in the future.

 

[army judge]

1) Is it worthwhile undergoing the complexity of an irrevocable trust to simply quality for Long-term medicaid help (either center or home based)

I doubt that anyone with hundreds of thousands of US dollars qualifies for Medicaid.

Don't confuse Medicare with Medicaid.

Medicaid is a joint federal and state program that helps cover medical costs for some people with limited income and resources. Medicaid offers benefits not normally covered by Medicare, like nursing home care and personal care services. The rules around who's eligible for Medicaid vary throughout the 50 US states

Don't muddy the water or undercook the chicken by soliciting FREE advice from unknown, unvetted entities.

Spend some of the hundreds of thousands in assets to ensure you won't get scammed!!!

Hire a great estate attorney to assist you making your every dream come true!!!

 

[adjusterjack]

Our situation is fairly straight forward with young kids, some passive real estate investments and retirement accounts. Btw we retire, we do expect 3-4m in assets incuding our primary home

Then there is nothing straight forward about your estate planning.

 

[Tax Counsel]

1) Is it worthwhile undergoing the complexity of an irrevocable trust to simply quality for Long-term medicaid help (either center or home based)

With $3-4 million in assets expected by the time you did, you really need to consult an estate planning attorney in your state for advice. Don't cheap out using a cookie cutter form or service. Those won't be tailored to your specific situation and that could lead to unwanted results. Understand that putting your assets into an irrevocable medicaid trust effectively gives up those assets — you'll no longer have control over them. Moreover, to qualify for medicaid assistance for living expenses, what you will be able to get from the trust will be pretty limited. Have you looked at nursing homes that accept medicaid patients? If the answer is no, then take a look at a few of them. I think you'll find them not very appealing. The irrevocable trust would be great for your kids/grandkids by preserving more of your assets because you are spending less on yourself this way. But I generally tell clients to first decide what kind of living arrangements they want in their older years and plan for that first. Anything left to the kids is a bonus.

Note that under current federal tax law there is no estate tax advantage to the irrevocable trust given the facts you've provided here. You'd need a significantly larger estate for that to matter. But there is an income tax disadvantage because the assets transferred to the trust during your lifetime will not get the step up in basis that occurs with assets you hold at your death. The lower the basis, the more income tax the trust or the beneficiaries will pay when assets are sold.

2) If no.1 is a Negative, then is a revocable living trust worth it to avoid cost of probate (I've heard 3-4% of estate size in the NY area being the norm). The service I use includes trusts in their package so I get to choose if I simply want a last will or 'trust + pour-over will'

Revocable living trusts are quite common for estate planning in NY. They avoid the time delay and extra costs that would occur if the assets have to go through probate before being distributed. Trusts are also private, so no one besides your beneficiaries will know what they are getting unless a dispute arises that goes to trial. Wills on the other hand are available to anyone to read at the courthouse. The arrangement most often used would be a revocable living trust plus a pour over will. The pour over will dumps any assets that didn't get transferred to the trust during your lifetime into the trust. Note that with revocable living trust, your assets do get a step up in basis for federal income tax as of the date of death, just as they would if they went to probate.

You want any wills or trust you use to be customized to your specific situation. It's worth the fees you pay to get this right.

 

[gerard2006]

One of the attorneys I spoke to today said for couples with minor children, it's best to stick with a simple last will plan instead of revocable trust since it'll go to probate anyways for guardianship of the minor children. Is this accurate? He said look at revocable trust after the kids grow up

Thanks

 

[adjusterjack]

, it's best to stick with a simple last will

Again, there is nothing simple about an estate worth millions.

Whether you use a will or a trust is up to you after learning all you can about both.

Guardianship of minor children might go through probate court but that doesn't mean you can't use a trust to avoid probate of your estate separate from the guardianship issue.

 

[Tax Counsel]

One of the attorneys I spoke to today said for couples with minor children, it's best to stick with a simple last will plan instead of revocable trust since it'll go to probate anyways for guardianship of the minor children. Is this accurate? He said look at revocable trust after the kids grow up

Thanks

Was this an attorney who does much probate work? The disposition of your assets is a separate issue from who will get guardianship of the children. Avoiding probate costs in handling the assets plus the ability to speed up distribution of your assets may make a trust worthwhile even though the probate court still determines who gets guardianship of the kids. Moreover, you can do things with a trust that you cannot do with a will, like defer distributions to the kids to pay for college expenses.

 

[zddoodah]

Just to expound on what "Tax Counsel" wrote: In New York, the process of probating a decedent's estate is handled by the surrogate's court. The process by which a person seeks an order for guardianship over a minor child is handled by either the surrogate's court or the family court (depending on circumstances). Even if the guardianship action is handled in the surrogate's court, the proceedings for guardianship are separate from the probate proceedings, so the rationale that "it'll go to probate anyways" doesn't make much sense.

Whether you want to answer here, think about the following:

- How old are you and your spouse?
- Accidents happen, but are you statistically likely to die before your kids reach the age of majority? More importantly, is there any real statistical likelihood that BOTH you and your spouse will die before then?
- What are your goals? Is your primary goal to preserve the greatest amount of assets for your children's benefit after you die? Or are you looking to retire as early as possible while maintaining a comfortable lifestyle until you die, without regard to what's left over when you die? Something in between or something else entirely?
- How much life insurance is each of you and your spouse carrying?
- Do you have a large pool of family/friends who could take care of your kids if you both die before they reach majority? Or is there just on person/couple or are there people you absolutely don't want taking care of your kids?

These are the sorts of questions that any attorney advising you about this stuff should be asking. If they're not being asked, then the advice you receive is a bit suspect.

 

[adjusterjack]

Accidents happen, but are you statistically likely to die before your kids reach the age of majority? More importantly, is there any real statistical likelihood that BOTH you and your spouse will die before then?

Must have been a statistician or actuary that figured this out on another site:

"Depends on the age of the parents as well as health condition, of course...

You can look at this through a purely statistical lense using Gompertz function which estimates mortality risk given a person's age. Obviously, the older the parents, the higher the probability they die before the child is 18. (Additionally, I assumed the mode for the age of death among men is ~85 and ~90 for women).

If both parents are 30 (male and female) when the child is born, here's the math:

The probability that the father will live at least another 18 years is ~0.98 (or 98%)

Therefore, the probability that the father will not live at least 18 years is 1 minus this or 1-0.98 = 0.02 or ~2% (in odds this is 49:1 odds against dying before the child is 18)

The probability that the mother will live at least another 18 years is ~0.99 (or 99%)

Therefore, the probability that the mother will not live at least 18 years is 1- minus this or (1-0.99) = 0.01 or ~1% (in odds this is 99:1 odds against dying before the child is 18)

The probability that neither the mother nor the father will live at least 18 years is simply the joint-mortality probability, or in this case 0.02 x 0.01 = 0.0002 or ~0.02%. In odds this is ~4,999:1 against this happening."

What are the odds of both parents dying before a child turns 18? - Quora

Those are long odds but they don't consider the odds of both parents dying at the same time, which may be what the OP is concerned about. Those odds are much longer.

Otherwise, one spouse will remain to take care of the children and will likely live beyond the children's majority.